Accountant

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What is an 'Accountant'

An accountant is a professional who performs accounting functions such as audits or financial statement analysis. Accountants can either be employed with an accounting firm or a large company with an internal accounting department, or they can set up an individual practice. Accountants are given certifications by national professional associations after meeting state-specific requirements, although non-qualified persons can still work under other accountants or independently.

In Canada, the CA (Chartered Accountant), CGA (Certified General Accountant) and CMA (Certified Management Accountant) were combined in 2012 under a single designation known as the CPA (Chartered Professional Accountant). This was done in an effort to reduce confusion and provide clarity and simplicity of oversight to the accounting industry.

Accountants can have more than one designation and may perform multiple types of accounting duties. The type of educational background and designation that an individual has will determine his or her professional duties. Accountants have bachelor’s degrees and may need to get a certificate, which can take up to a year to obtain depending on the type of certification being pursued and the state in which those requirements must be met.

In the U.S., certification requirements for accountants can vary from state to state, but one requirement that is uniform in every state is the passing of the Uniform Certified Public Accountant Examination, an exam that is written and graded by the American Institute of Certified Public Accountants.

Legal Requirements

Certified public accounts have a legal responsibility to be honest and to avoid negligence in their duties. CPAs have real influence over their clients, and their judgments and work can affect not just an individual but an entire company, its employees, board and investors. Accountants may be held liable for paying uninsured losses to creditors and investors in the case of a misstatement, negligence or fraud. Accountants can be held liable under two different types of law: common law and statutory law. Common law liability includes negligence, fraud and breach of contract, while statutory law includes any state or federal securities laws.

History

The first professional association for accountants, the American Association of Public Accountants, was formed in 1887, and CPAs were first licensed in 1896 when cost accounting, and accounting in general, became of real importance. It grew as a profession during the industrial revolution, as businesses grew and shareholders and bondholders, who were not necessarily a part of the company but were monetarily invested, wanted to know more about its financial wellbeing.

After the start of the Great Depression and the formation of the Securities and Exchange Commission (SEC), the agency required all publicly traded companies to issue reports written by accredited accountants. Since the turn of the 19th century and the reforms put in place following the Great Depression, accountants have been a ubiquitous and crucial part of any business.